The Determinants Of Taking Big Bath: An Empirical Study

Facing the changes in accounting institution and principles at present,listed companines in both China and United States have all reported unoprecedented big deficiency.Unexceptionally,they blamed to changes in accounting institutions and principles when explained:What else the real reason and does it really exist?What is the reason for big bath?The general idea of this paper is to research these questions empirically. On base of the information asymmetry,principal-agent theory and selective release of fake accounting data,combining the research method and coclusion of former literature and the special research background in China ,this paper analysis influences in big bath that come from listed companies,government and accounting, Fiestly,to find out that whether big bath exists in national listed companies ,a research has been made on unexpected earnings in these companies from 2000 to 2003.Then,logistic regression is employed to empirically research a sample comprised of 276 companies,7 factors which related to big bath have been taken into account .The results are summarized below:The changes in our country`s accounting policy is an obvious reason for big bath .When the big changes occur in accouting principle and institution .Some listed companies ,which used to doing false report and unstable accounting policies that lead to false asset debt will consider the changes as a chance to doing big bath,and will contribute it to the new principle and institution . in varieties which have relation to enterprises,size,changes in stochholders and senior managers all have effective influence.More huge, the company is more unwilling to take bath .This shows listed companies in our country have strong sensitivity in policy ; Variance in management will lead to big bath in listed companies.The reason is to avoid responsibility and increase reture in the future ; When being in trouble ,the listed companies usually adopt big bath to minimize false asset that came from income increasement and expenditure conceal before.They also explain these amazing loss on uncontrollable factors,such as marketing environment change. In the varieties of companies accounting ,except for marking dilemma ,all have obvious effect on the big bath. As for the changes of stockholders and accounting companies,the research proved that the influence is less and has no statistical meaning.